Cannabis stocks rally on Wall Street Journal report that Trump is weighing drug reclassification

Many stocks in the sector now sell for less than a dollar per share, meaning a move of just a few cents can lead to a large percentage change. Despite Monday’s rally, many of these stocks are far below their all-time highs.

The latest gains followed a report in the Wall Street Journal late Friday, citing people familiar with White House thinking, that Trump was weighing whether to move marijuana to a less-dangerous drug classification. Trump shared his consideration of the matter during a fundraiser at his New Jersey golf club earlier this month, the people said.

Under federal law, cannabis is currently classified as a Schedule I drug in a group that also includes heroin and cocaine. Previously, reclassification discussions have centered on moving the drug to Schedule III, a class that includes steroids and Tylenol with codeine.

Reclassification would allow marijuana companies to fall under different tax regulations and encourage investment interest, among other benefits.

A move from Schedule 1 to Schedule 3 would be “a gamechanger” for the roughly $80 billion market, said Tim Seymour, investing chief at Seymour Asset Management, on CNBC’s “Worldwide Exchange” on Monday. He noted that such a change has seemingly bipartisan support.

“It does not mean that it won’t be a complicated trade,” Seymour said. “But it does mean that you’re investing now well ahead of a lot of institutional capital if you are, in fact, investing into this sector.”

To be sure, Trump’s backing can brighten the outlook but he cannot reclassify the drug alone. The Controlled Substances Act places that authority under the Attorney General, who has historically delegated it further the administrator of the Drug Enforcement Administration.